4-Star Stocks Poised to Pop: Corrections Corporation of America

By Brian D. Pacampara | More Articles
April 15, 2011 | Comments (1)

Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, correctional and detention facilities operator Corrections Corporation of America (NYSE: CXW ) has earned a respected four-star ranking.

With that in mind, let's take a closer look at Corrections Corp.'s business and see what CAPS investors are saying about the stock right now.

Corrections Corp. facts

Headquarters (founded)	Nashville, Tenn. (1983)
Market Cap	$2.61 billion
Industry	Security services
Trailing-12-Month Revenue	$1.68 billion
Management	CEO Damon Hininger (since 2009) CFO Todd Mullenger (since 2007)
Return on Equity (average, past 3 years)	10.9%
Cash/Debt	$25.5 million / $1.16 billion
Competitors	GEO Group (NYSE: GEO )

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 95% of the 352 members who have rated Corrections Corp. believe the stock will outperform the S&P 500 going forward. These bulls include awu3210 and taylor4u.

Late last year, awu3210 touched on the trends working in the stock's favor: "Basically part of a duopoly -- the other being GEO, except [Corrections Corp.'s] got excess beds in its inventory waiting to capitalize on the problems states are facing, namely prison overcrowding and pension problems."

Corrections Corp. even boasts a robust three-year average operating margin of 19.2%. That's higher than that of main rival GEO Group (12%), as well other security plays such as Brink's Co. (NYSE: BCO ) (6.2%) and China Security & Surveillance (NYSE: CSR ) (13.3%).

CAPS member taylor4u elaborates on the bull case:

CXW has several trends working in their favor. An Increasing population means more prisoners. The last census showed most of the growth was in the south and west where CXW has most of its operations. Also, budget conscious governments will look to private prisons to save money. They also say they pay unemployment taxes which will decrease if the number of claims decrease which should happen eventually. Add that to the already overpopulated prisons and CXW looks like a buy.

What do you think about Corrections Corp., or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Corrections Corp. is a Motley Fool Stock Advisor pick. Brink's is an Inside Value selection, and the Fool owns shares of it. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Read/Post Comments (1) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.

Report this Comment On April 15, 2011, at 3:45 PM, holdco99 wrote:

I own Corrections Corp. I agree that Corrections Corp is 1. well run, 2. benefits from the fact that it provides a direct value proposition to its customers as it has a superior cost structure relative to public prisons, 3. allocates capital reasonably well.
However, I will also say that Corrections Corp should be earning less. If our local, state, and federal governments weren't so stupid, they probably would pressure Corrections Corp more on fees. There is not much Corrections Corp could do. Corrections Corp has had some pricing pressure which they have offset with spending less per prisoner in certain areas, but on the whole they haven't had that much pricing pressure.
In other words, CXW is a good company, but it's totally dependent on local, state, and federal governments. Fortunately, they tend to act separately so CXW has done ok on pricing. But if I were CXW's customer, I would just price between current pricing and marginal cost.

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